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Informist, Tuesday, Oct. 15, 2024

By Anjana Therese Antony

MUMBAI – Despite strong earnings growth expected from Bajaj Auto for the September quarter, scheduled Wednesday, traders turned cautious towards the stock in the derivatives segment Tuesday as the valuation remained expensive. Premiums on deep out-of-the-money call options expiring Oct. 31 halved and those on puts more than doubled, hinting at the caution. The stock closed over 3% lower at INR 11,521.50 on the National Stock Exchange and was the second-biggest laggard on the Nifty 50.

For Jul-Sept, the two- and three-wheeler manufacturer is likely to post 23% on-year growth in its net profit to INR 22.62 billion and revenue is seen rising 24% to INR 133.17 billion, according to the average of estimates from 10 brokerage houses. This will be supported by healthy growth in volumes, price hikes, better realisation and operating leverage, analysts said. 

Analysts said the stock's valuation remains relatively expensive, which had pulled the price sharply lower intra-day on Jul. 18 after rising on robust earnings growth. The fall, despite the strong growth estimate figures, was attributed to the expensive valuation of the stock, where the market had factored in all the near-term positives. 

In the options chain of Bajaj Auto, premiums on INR 11,500-12,000 call options fell 41-53% and those on INR 11,500-10,500 put contracts increased a whopping 95-122%. The highest open interest addition was at INR 12,000-call and INR 15,000-put options. The October futures contract of the company also mirrored the weakness in the cash market and closed 3% lower. Open interest rose 6% to 2.26 million. 

The overall Indian stock market may also see similar weakness Wednesday amid expensive valuations and anticipation of a slowdown in earnings growth, analysts said. The Nifty 50 closed 0.3% lower at 25057.35 points and the BSE Sensex ended 0.2% lower at 81820.12 points Tuesday. The near-term support for the 50-stock index is seen at 24950-24900 points and resistance at 25150-25200 points. 

Premiums across call options of the Nifty 50 almost halved and those on put strikes close to the spot level rose 10-20%, hinting at near-term bearishness. The maximum open interest addition was at 25200-point call and 23050-point put contracts. In the September futures of the Nifty 50, open interest rose 2% to 13.77 million. 

--Nifty 50 Oct closed at 25131.25, down 90.25 points; 73.90-point premium to spot index

--Nifty 50 Nov closed at 25286.00, down 77.45 points; 228.65-point premium to spot index

--Nifty 50 Dec closed at 25433.50, down 74.20 points; 376.15-point premium to spot index

Reliance Industries, ICICI Bank, HDFC Bank, Infosys, HCL Technologies, Divi's Laboratories, Axis Bank, Bajaj Finance, HDFC Life Insurance Co., Kotak Mahindra Bank, Hindustan Aeronautics, Hindustan Petroleum Corp., InterGlobe Aviation, Maruti Suzuki India, and HDFC Asset Management Co. were the most-actively traded contracts.  End

Edited by Tanima Banerjee

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